- The Washington Times - Thursday, July 20, 2000

ERMERA, East Timor High in East Timor's hills, hundreds of poor farmers lead donkeys burdened with sacks of freshly picked red coffee cherries down muddy tracks to a local factory.

On the ground, piles of coffee beans dry in the tropical sun, as farmers squat in the dirt and haggle over the value of their harvest.

This pastoral scene in Southeast Asia may seem from a bygone era, but for the East Timorese, it's their best shot at economic self-sufficiency.

Soon after the independence ballot that led to East Timor's violent break from Indonesia last August, many observers had predicted the new nation might never be self-sustaining and would remain reliant upon foreign aid.

Nearly a year later, East Timor's U.N. administrators are optimistic that the tiny half-island state eventually may have a chance at economic viability through its one cash crop: high quality, organically grown coffee.

After centuries of colonial misrule by Portugal and 25 years of corrupt and repressive Indonesian occupation, East Timor is one of the poorest parts of Southeast Asia.

Much of its infrastructure lies in ruins, destroyed by angry, pro-Indonesian militia gangs after last year's referendum supported independence.

Outside the capital, Dili, electricity and water supplies are sporadic at best. In the cities and towns, unemployment runs at about 80 percent. Gangs of youths roam the streets looking for ways to make money. Little foreign investment is coming in, frightened off by an uncertain political future and messy land disputes.

Yet the outlook for coffee is bright.

East Timor's coffee factories and crops weren't destroyed in the violence. Starbucks Corp., the U.S.-based coffee giant, already is one of East Timor's best clients, and there is hope the territory's beans will end up in many of the world's cappuccinos, lattes and espressos.

More broadly, the United Nations is drawing up an economic blueprint aimed at providing East Timor with a strong, albeit small, economy centered on coffee before pulling out in about two years.

Offshore oil and gas reserves, still relatively undeveloped, bring in about $5 million a year. That figure should multiply several times when new fields are tapped by 2003. East Timor is negotiating with its neighbor, Australia, to increase its share of royalties from oil projects.

U.N. economist Fermada Borges said the world body also is looking into a possibly lucrative fishing industry and has started to replant valuable sandalwood trees that once dotted the island.

But the biggest cash crop should be coffee. The Portuguese established plantations in East Timor's highlands several centuries ago. With cheap labor and a thirsty coffee market, the industry thrived.

When Indonesia invaded in 1975, the military took control of the lucrative trade, but prices, processing standards and exports slumped.

The monopoly continued until 1994, when New York-born trader Sam Filiachi arrived. With a little political help from Washington and some seed capital from the U.S. Agency for International Development, he set up an export cooperative that loosened the Indonesia government's tight grip on the coffee business.

The price paid to farmers increased as the world snapped up East Timor's organically grown arabica and robusta beans. The smooth flavor and low acidity were an instant hit with coffee lovers and roasting companies seeking to soften their blends.

Seattle-based Starbucks buys much of East Timor's coffee exports, which increased with every harvest until last year's violence.

"Coffee is going to be the backbone of East Timor's economy," Mr. Filiachi said.

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